Archived Posts from this Category
Archived Posts from this Category
A friend of this Web site, Andrew Hetzel, called it the best article about Kona coffee ever written. That’s a pretty tall order. But this piece, which came out a couple days ago, makes a compelling argument: Hana Hou: The Magazine of Hawaiian Airlines – Adventures in Coffeeland. It’s at least good enough to make you forget that it was published in a in-flight airline magazine (Hawaiian Airlines).
What makes this article a lot better than the others of its kind is that it looks beyond the usual marketing spin for both the good and the bad, it draws out some essential observations about the market opportunities and challenges for Kona coffee growers, and it goes into sufficient depth on some of its subjects. The author even dogs on Island Lava Java — where we cut them a little slack for some improvements on our last visit.
Another friend of this Web site, Shawn Steiman, is cited in the article and offers one of its many good quotes: “One lesson I’ve learned is that what coffee geeks consider the best coffees aren’t all that cherished by non-coffee geeks.” For another great quote from the article:
For all its urban faddishness, coffee is still a Third World crop, picked mostly by subsistence laborers in Latin America, East Africa and Southeast Asia. Hawai‘i, meanwhile, is the costliest state in one of the world’s costliest nations, a tough place for an agrarian enterprise these days, as the sugar and pineapple industries can attest. With wages for Big Island pickers many times greater than those of their counterparts in developing nations, Kona coffee will always be overpriced; or perhaps the rest of the world’s coffee will always be underpriced.
Of the coffee industry insiders we’ve long known, Kona coffees have earned a reputation for both quality and for being overpriced. But there are real-world reasons behind that. It’s a good lesson for the many conscientious types who gripe about coffee companies needing to pay living wages and offering health care to their employees — but who are often the first to rebel against the coffee prices necessary to pay for all of that.
Among coffee aficionados in town, quality artisan coffee originates with Origin. Opening in 2006 in a more modest space, this place changed the face of coffee in Cape Town if not South Africa. Since its expansion, it is now three transparent levels of coffee, café, roasting, regional Synesso distributor, and barista training labs. If that wasn’t enough, there’s even a Nigiro Tea salon inside that will wow any tea lover. (“Nigiro” being “Origin” backwards.) It’s no mistake that the three core people behind the cool South African coffee blog, I Love Coffee, chose to meet me at this very place to discuss the local coffee culture.
One of the striking things about this three-level church of coffee is its level of transparency and open access. Through efforts such as Fair Trade, Direct Trade, and the organic coffee movement, transparency in the industry has become an operative word. Here that transparency comes to life — as visitors are welcome to walk throughout the building, check out their roasting operations, inspect their bags of imported beans, and tour their barista training facilities.
The service area downstairs is dark with wood slat walls — sporting an array of Hario vac pots, moka pots, drippers, home espresso machines, and beans. Sure, you could say that this place has all the same fad-driven coffee trappings at Truth., but for some reason it seems more genuine in this environment. There is plenty of seating and a two-group La Marzocco Linea at the ready for espresso drinks. Though this Hudson-Street-level downstairs entrance is a bit clubby with a lounge-like feel.
Signs announce the more interesting fresh roasts from Origin’s roasting operations, with a heavier emphasis on African-sourced-beans (Tanzania, etc.) but also some single origins from familiar terroir in Central and South America plus the occasional El Salvador Cup of Excellence. Signs also announce Origin’s place as the home of the 2007 & 2008 South African barista champions.
Up the stairs past the Nigiro Tea salon, you enter their second level which consists of offices and a series of benches that form an espresso machine lab. Here, with barista certifications of employees hung on the wall, you can work with a Synesso machine, a WEGA, or a variety of other machines for training (or repair) services. Five years ago we recall Eton Tsuno of the defunct Café Organica espousing his vision for an espresso bar that offers home barista training, showcases home espresso machine models, etc. It’s been five years, and San Francisco still has yet to deliver on that vision. But here it is in Cape Town, South Africa — almost exactly as Eton described.
Upstairs to the top floor, you encounter their main roasting operations, a lot of in-process bagging for shipment, and a soul food café. Towards the rear of the floor, there’s a brighter, glass-enclosed seating area that opens out to patio tables and chairs under parasols across from nearby modeling agencies. There’s plenty of café seating there behind the bright panes of glass with a chalkboard wall that’s something of a community chat space.
Like a few other quality places in the area, they serve their espresso shots as default doubles. There are no cappuccinos on the drink menu: only flat whites. There’s even a “3/4 flat white” for this who like theirs with less steamed milk. Staff wearing Origin “Some Like It Black” T-shirts use another two-group La Marzocco Linea machine to pull their double shots in 30ml shotglasses (for R14), placed on a saucer with a short glass of mineral water on the side. Origin used to offer ceramic demitasses for their espresso, but they’ve run out and are awaiting a new supply (they complained that those from the previous supplier chipped too easily).
Their espresso has a hefty, darker brown crema that persists, a robust body (one of the better examples in Cape Town), and a rounded, pungent, herbal-based flavor with spices and sweetness at the bottom of the cup. They also produce excellent microfoam: it’s even and not overly generous on their cappuccino (OK, “flat white”). You can readily see how inspirational Origin is — any town would be lucky to have it.
Read the review of Origin Coffee Roasting in Cape Town, South Africa.
What is it about coffee today that makes it such a lightning rod for consumer indignation and class warfare? Nobody expresses outrage over a $400 bottle of wine, a $110,000 MSRP Mercedes-Benz, or even a $300,000 diamond-encrusted smart phone. But should someone dare sell a cup of coffee for $12, the world is coming to an end.
And it’s not just the price tag that gets people taking up torches to Frankenstein’s castle either. Bring up a $12 cup of coffee, and angry mobs start asking about how much is going back to the farmers — or how much of the perceived price gouging should be donated to charity instead. Yet this reaction never happens with expensive wine, cars, or mobile phones. (We’ve even noted how this doesn’t even happen with tea.)
People willing to splurge once in a while on a $12 cup of coffee are then invariably labeled “idiots.” But the same could be said of any passion or hobby that each of us spends our discretionary income on: wine, automobiles, NFL tickets, cable TV subscriptions, golf memberships, works of art, Disney vacations, etc. So why all the hostility as if a $12 cup of coffee were a personal threat?
In pearls before swine parlance, we are all swine about something that others deeply value. What makes coffee different is that we resent the suggestion of being “swine” when it comes to something we already relate to and experience. What could be presumed is that our taste in coffee is no longer good enough — as if what someone else drinks is somehow a value judgment about ourselves. Talk about insecurity.
One of the reasons for this cultural dissonance is that coffee is still largely perceived as a universal, utilitarian beverage of only marginal quality differences — an old notion rooted in coffee’s mass production in the 20th century. Another reason is the sense that specialty coffee has gotten too fancy for its own good. But yet another reason is that very few people in our complex society honestly know what things really cost — even if we all think we do.
Oscar Wilde once famously said that a cynic knows the price of everything but the value of nothing. Most consumers know the price of everything but the cost of nothing. Coffee is a prime example. This is what makes layman reporters’ eyes bug out when they see the $18,000 MSRP price tag for a Slayer machine. They think you’re launching the thing on a mission to Mars for that price, completely oblivious of the fact that a decent — and more “pedestrian” — La Marzocco GB/5 machine runs for more than $20,000.
When people complain about the mythical $4 cup of coffee — or the “How I bought a house by making my own coffee at home” myth — they commonly operate with the false perception that retail coffee is $0.20 ingredients and $3.80 pure profit. This despite public information that has continuously shown that coffee makes up less than 10% of Starbucks’ operating expenses. We’ve vainly tried to explain that the biggest expense in a cup of retail coffee is isn’t coffee beans, so this time we’ll try to back it up with public data.
One major challenge is that every coffee shop is different. Another challenge is that the figures are often obscured in research reports costing thousands of dollars. We unfortunately couldn’t reproduce a recent chart for Starbucks showing how much labor costs were their biggest expense in a cup of coffee. However, here we’ve plotted data from one UK report in 2007 and a BIS Shrapnel report from 2006 showing the production costs of a retail flat white (call it a cappuccino for American purposes).
The chart at left represents the cost breakdown for a major coffee retailer, such as Starbucks. It not only includes labor, profit, and local taxes, but there’s also an administration overhead that covers things like advertising and marketing expenses, utilities, insurance, etc. The chart at right does not include the overheard of rent, administration, nor profit; it more closely represents just production costs.
The thing to note here is how little the actual coffee represents in the price of a retail coffee — and how much its price reflects labor, rent, utilities, and other costs.
So when you’re buying a specialty, limited supply, microlot coffee for $12 a cup, the cost of the coffee beans can increase by an order of magnitude. But don’t overlook the impact of labor costs on the end price. A delicate, pedigree coffee can be wasted by “normal” brewing methods. While vacuum pots and Hario drippers do a far better job of showcasing the coffee beans, they are far more labor intensive than brewing in a basic French press or generic coffee urn.
Even if you can successfully explain the constituent costs in a $12 cup of coffee, that still doesn’t explain the recent media freak-out in New York City over it. Aren’t New Yorkers supposed to be the cultural sophisticates — and not the ones stepping off the Greyhound bus on 42nd Street yelling, “Golly!!! That there sure is one tall combine!” like some wide-eyed Kansas farm boy?
Contrast New York City’s recent reaction with a $14 cup of microlot coffee that ranked no greater than a mere footnote in the Yakima Herald in 2008:
And while supplies last, you can order up a $14 cup of coffee made from Nicaraguan beans that Stumptown bought at auction for $47.06 per pound. According to buystumptowncoffee.com: “Its thick caramel notes, Granny Smith apple, kiwi and apricot flavors had us awestruck and thirsting for more.”
When it comes to coffee, it’s as if New York City keeps inventing new ways to embarrass itself.
Please repeat after me, aspiring journalists and laymen alike: when you buy food or drink retail, you’re mostly buying labor. When you drop three bills for dinner at The French Laundry, you’re not primarily paying for a grocery shopping list of ingredients. This really shouldn’t be that hard to understand.
One of the long running jokes among the (these days: masochistic) fans who follow Italian soccer is that — at least according to the Italian sports media — teams tend to go from “crisis” to “crisis” several times in a given season. If a top-caliber team doesn’t win for two straight matches, sono in crisi (or “they are in crisis”). It’s as if the Italian media have a mission to create melodrama.
We think about that sometimes when we hear about the new coffee crisis: global warming, or climate change if you prefer. If you weren’t keeping score, the last coffee crisis was rooted in the collapse of coffee prices. With the 1989 dismantling of what was essentially a cartel among coffee producing nations, mass market coffee greens went from a high of about $1.50/lb to an all-time low of $.46/lb in 2003 — a pricing collapse catalyzed by the influx of mass-produced, low-grade Vietnamese robusta. It was this crisis that gave root to Fair Trade and other economic initiatives — to stave off the inequities of the coffee trade from spreading poverty and putting coffee growers out of business.
However, today coffee has a new crisis. From papers [pdf, 622k] presented at the 2007 SCAA conference to some of the key talks at the conference last weekend (not to mention posts here going back to 2006), there’s been a lot of chatter lately about how the forces of climate change are reducing crop yields, eradicating available land use for coffee production, and extending the breeding grounds of harmful coffee plant pests. This month’s CoffeeTalk cover story comes with the apocalyptic headline, “Can this really be the end?” and the quote:
Nearly all of the specialty coffees in Latin America are sold and shipped. There simply are no quality Latin coffees left except Brazilian and those are going fast.
Something is seriously going on. But is it a bit premature to declare the end of coffee? There’s real danger in being false alarmist.
Whether it is quality coffee or anchovies off the coast of Chile, one of the biggest safeguards for a product’s survival is a group of consumers willing to pay a decent price for the good stuff. So when we read lamentations that coffee is going to disappear, and that coffee consumers are going to flee for cheaper energy drinks, we get the sense that these are primarily concerns for the lower grade coffees we generally avoid anyway.
Yesterday we attended a Meet the Producers event hosted by the Epicenter Cafe and Barefoot Coffee Roasters and got to test this theory. There we talked with Barefoot’s “Chief Espresso Officer,” Andy Newbom, to ask his opinion on the subject — in addition to the opinions of visiting coffee growers from El Salvador and Guatemala.
Sure enough, they all confirmed our suspicions. As long as there are consumers willing to pay for good coffee, there will be a market for good coffee. It does leave concerns about supplies at the mid-range and low end. But the best way to ensure there will always be supplies of good coffee is to keep demanding it and paying a premium for it.
Saturday’s Chicago Tribune published a pretty good piece on Intelligentsia CEO, Doug Zell:
Intelligentsia Coffee’s CEO talks beans – chicagotribune.com.
While Doug gets a little loopy (our opinion) in abusing the ever-popular wine analogy for coffee — e.g., espousing such shoehorned ideas as coffee pairings — he’s been a pioneer and leader in areas such as:
The article also notes the roots of his coffee experience at the Bay Area’s Peet’s and Spinelli chains (the latter since bought out by Tully’s), Intelligentsia’s successes at barista competitions, and working with area restaurateurs.
However, on that last note, the article also quotes Rick Bayless — the “Frontera Grill/Topolobampo chef/cookbook author/TV personality.” While he is a genuinely talented perfectionist himself, and we love his food, his restaurants pull some of the weakest shots of Intelligentsia we’ve ever had.
Just when you think the profession of the coffee “middleman” was on its way out in this era of the Internet, in come a number of entrepreneurs trying to reintroduce them. What we’re talking about are consumer retailers that intermediate the sale of roasted coffee — with examples that include Citizen Bean, GoCoffeeGo (see Man Seeking Coffee’s recent review), and ROASTe.
These e-retailers provide online storefronts for consumers to review, order, and purchase roasted coffees from a variety of specialty coffee roasters. Virtually all of the participating roasters already have their own online storefronts with support for direct ordering. So the value of these e-retailers is supposedly in the discovery of new roasters and the convenience of buying your roasted coffee from one Web site. Or so the PR machines behind them have stated in our stuffed e-mail inboxes over the past few months.
In some ways, this reflects the ambitions of entrepreneurs who wish to shoehorn the specialty wine merchant business model on coffee’s ever-popular wine analogy. Other elements seem like attempts at coffee’s wine-of-the-month club. In either case, a major flaw in this model is that coffee, unlike wine, goes stale immediately after roasting. To address this, these e-retailers have established on-demand roasting relationships with their roasters.
Another major challenge with this business model concerns pricing. Adding a middleman always costs more money than a system without one, as they have to make expenses and payroll on top of all the other costs in the supply chain. It’s for this reason that coffee middlemen have been extremely unpopular in recent years. They’ve been demonized by the Fair Trade movement as unnecessary leeches, siphoning money from the coffee trade supply chain that should otherwise be going to coffee farmers.
In fact, the entire financial premise behind Fair Trade and Direct Trade coffee is to get rid of the middlemen. So who is paying for these e-retailers? Right now, it seems to be an arrangement akin to that of travel agents before the age of the Internet: the seller picks up the additional costs as a marketing and distribution expense, and no additional costs are passed on to the consumer. But how long will this last once the consumer novelty wears off?
It’s indirect trade: buying coffee through these roasted coffee brokers effectively cuts into the coffee roaster’s capacity to pay top dollar to their coffee farmers.
The travel agent analogy to these e-retailers is fitting, as there’s little you can do with them that you cannot already do directly, and more cheaply (total supply chain cost-wise), over the Internet. Like travel agents in their heyday, the value of a middleman comes when there is a lack of consumer information and/or a lack of direct public access to the suppliers. The Internet has rendered both as non-issues when buying roasted coffee. And we all know what happened to travel agents. So unless the individual roasters themselves completely screw up their business at sales and distribution, a middleman will have a very limited opportunity to improve upon these relationships.
For a comparison, over the years I have purchased green coffee beans (for home roasting) from distributors such as Sweet Maria’s and The Coffee Project. Why? For one, I simply cannot find supplies down the street. It also helps that a Web site like Sweet Maria’s provides a lot of flavor profile information and roasting recommendations. But if individual farms I knew and trusted started selling directly over the Web, that would change things.
Does this mean that these e-tailers don’t provide a valuable service customers want? Absolutely not. A number of them already have vocal, loyal customers. There may turn out to be a sustainable long-term market for one or two of these middlemen for a limited set of customers. But given the economic and disintermediation forces of the Internet, we foresee a pretty ugly commercial bloodbath on the horizon for a number of them. Travel agents did give way to travel-aggregating Web sites, but then we already had an established need for travel agents well before the Web came along.
Last week the Christian Science Monitor published an article highlighting the economic pressures on Latin America’s organic coffee farmers: Organic coffee: Why Latin America’s farmers are abandoning it / The Christian Science Monitor – CSMonitor.com.
Just as Fair Trade designed their program to attract coffee growers through the promise of financial incentives, once they made initial certification investments, organic certification has also been promoted as a way for them to earn higher margins for their crops. However, over the past few years — while Wal-Mart became the nation’s largest buyer of Fair Trade/organic decaffeinated coffee — the premiums paid for organic coffee have shrunk.
The economics of growing organic coffee in Latin America are now causing some farmers to “switch sides”. We’ve long been rather ambivalent about Fair Trade’s potential to live up to many of its good intentions. Although you could argue that “organic” is just another flawed solution attempted through the magic wand of certification, its aims and goals always seemed much more realistic and achievable.
Opening last month on the site of a former Briazz prepared-foods (lunch, primarily) chain shop, this corner café isn’t much of a leap from its predecessor. They serve sandwiches, soups, and salads as before — but with an emphasis on cocoa and espresso.
The store seeps causes from its signage: Fair Trade coffee and cocoa, Clover organic milk, etc. Yet that’s the required price of entry for doing business in SF these days: unless your front door bleeds feel-good causes, you have not justified why you’ve chosen to offend the public by opening a for-profit business in town. Even if said causes are more platitude-driven, high-gloss window dressing than substance (
energy-inefficient polluting recycling or coal-burning electric cars, anyone?).
In addition to a wall of prepared foods and a central counter with a small, two-group E91 Faema Diplomat machine, there’s seating along the corner windows and some outdoor searing along Sutter St. at café tables. Deep in its recesses are the free Internet junkies on laptops, banished to the corner with power cords dangling from the ceiling.
In making a shot from Mr. Espresso beans, the barista is slow, careful, and deliberate. The resulting cup has a mottled, textured, medium-brown crema of average thickness, but it congeals rather richly. The shots also run on the short side, served in black ACF cups. Despite all that, it is relatively lacking in flavor. There’s no real “punch” to the shot; it has a tepid, mellow flavor of mild spices. Somehow they manage to serve a shot with a proper size and a promising crema that doesn’t quite live up to your expectations.
Read the review of Bread & Cocoa.
As Starbucks‘ future looks ever bleaker and bleaker, CEO Howard Schultz continues his maniacal lever-pulling atop Starbucks’ runaway corporate bulldozer. After shedding themselves of music, movies, and books, they’ve tried everything from an online suggestion box and free coffee promotions to membership cards to less expensive (“daily”) roasts and smoothies. Mr. Schultz’s latest lever pull du jour seems to be coffee ethics, as this week Starbucks announced plans to source Fair Trade beans for all the espresso drinks they serve in the UK by the end of 2009: All Starbucks’ coffee to be Fairtrade – News, Food & Drink – The Independent.
This is hardly a new angle. Nearly two years ago, we wrote about McDonald’s announcement that they would source Rainforest Alliance coffee in the UK to ethically one-up Starbucks. But it was only less than a month ago that Starbucks announced that they were committed to doubling their sourcing of Fair Trade beans — albeit from less than 4% of their total coffee purchases to a whopping 6%. That makes this week’s announcement for the UK market appear to be a rapid escalation in retail coffee’s ethics wars.
The British already appear to be viewing Starbucks’ “100% Fair Trade” announcement with a surprising degree of suspicion and cynicism. And although Starbucks stated that they ultimately want to switch to 100% Fair Trade beans around the world, they would be far from the first of the major chains to do so in America. Tully’s Coffee, for example, switched to 100% Fair Trade beans over a year ago. Looking at Tully’s recent earnings statements, the move clearly hasn’t hurt Tully’s growth. But it’s hard to say if such a strategy will help pull Starbucks out of their retail funk, given that Tully’s is far from the only major coffee chain that is profiting this year while Starbucks ails.
The bigger question for us, as always, regards the legitimacy of Fair Trade and what Starbucks’ actions do to its public perception. Despite intentions, Fair Trade falls short of its goals on many levels — many of them publicized by Intelligentsia‘s rather public break-up with TransFair USA in 2006. An even bigger concern is how Fair Trade is being given an undeserved monopoly status on ethical sourcing. This issue was recently best described by Sam Mogannam, a good-friend-of-a-good-friend and owner of the Mission‘s Bi-Rite Market, at August’s “Building a Slow Food Nation” panel discussion (which was held at the the Commonwealth Club for Slow Food Nation ’08):
Anya [to Anya Fernald, Executive Director of Slow Food Nation ’08], you were talking about labels: fair-trade, organic. As important as they are, those labels were designed for the big box stores — so when you walk into a supermarket and you see an organic or a fair-trade label, you have some sense of provenance, some sense of pedigree, for those products. But there are many products that don’t have a certified organic label on them that go way beyond what an organic grower does.
Today’s San Jose Mercury News ran a nice, local puff news piece today on the Di Ruocco family, of Mr. Espresso fame: Di Ruocco family crafts coffee with care – San Jose Mercury News.
The fluffy article documents some of the background behind Carlo Di Ruocco, who founded Mr. Espresso over 30 years ago because he couldn’t find a decent espresso to drink in the area. (We can sympathize: it was bad enough just a decade ago.) Mr. Di Ruocco’s Mr. Espresso also became a licensed Fair Trade Certified roaster in 1999 — or more than seven years before whiny college students, who now militantly insist upon Fair Trade, even heard of the stuff. (So there.)
We last met Mr. Di Ruocco at the Slow Food Foundation for Biodiversity Coffee Presidia tasting — at his son Luigi’s Coffee Bar. It’s great seeing local legends still very active in the area’s coffee community.